Opinion
07-23-00061-CV
07-07-2023
REGENT GENERAL CONTRACTORS, INC. AND THOMAS MICHAEL PRITZKAU A/K/A TOM PRITZKAU, APPELLANTS v. MINTAKA FINANCIAL, LLC, APPELLEE
On Appeal from the County Court at Law No. 3 Tarrant County, Texas Trial Court No. 2020-007161-3, Honorable Mike Hrabal, Presiding
Before QUINN, C.J. and PARKER and DOSS, JJ.
Because this matter was transferred from the Second Court of Appeals, we apply its precedent when it conflicts with that of the Seventh Court of Appeals. Tex.R.App.P. 41.3.
BRIAN QUINN, CHIEF JUSTICE
This appeal arose from the foreclosure upon and sale of collateral, coupled with effort to collect the deficiency. The creditor, Mintaka Financial, LLC, successfully moved for summary judgment against its debtors, Regent General Contractors, Inc. and Thomas Michael Pritzkau a/k/a Tom Pritzkau (Regent). Through one issue, Regent contends that the trial court erred in awarding summary judgment because, among other things, Mintaka failed to prove the collateral's sale was commercially reasonable. The collateral consisted of a 2017 GMC 12T truck used in the debtor's business. Purchased in 2019 for approximately $87,000, the creditor sold it in May 2020 for $26,000 through an online auction house. We sustain Regent's issue and reverse.
A secured party has the right to take possession of collateral after a default, sell it, and sue for any deficiency remaining after application of the sale's proceeds to the debt. Regal Fin. Co. v. Tex Star Motors, Inc., 355 S.W.3d 595, 596-97 (Tex. 2010); Suntrust Bank v. Monroe, No. 02-16-00388-CV, 2018 Tex.App. LEXIS 942, at *23-24 (Tex. App.-Fort Worth Feb. 1, 2018, no pet.) (mem. op.). Yet, to recover the deficiency it must prove that it acted in a "commercially reasonable" manner when disposing of that collateral. Suntrust Bank, 2018 Tex.App. LEXIS 942, at *24. This burden encompasses proving that each aspect of the collateral's disposition, including the method, manner, time, place, and other terms of its disposition, were commercially reasonable. Id.
This burden was triggered here by Regent's specific denial to Mintaka's general averment about conditions precedent being performed. See Greathouse v. Charter Nat'l Bank-Southwest, 851 S.W.2d 173, 176-77 (Tex. 1992) (stating that a creditor in a deficiency suit must plead that disposition of the collateral was commercially reasonable. The pleading may be specific or general by averring that all conditions precedent have been performed or have occurred. If pleaded generally, the creditor is required to prove the disposition was commercially reasonable only if the debtor specifically denies it.).
Commercial reasonableness is inherently a fact-based inquiry that entails the balancing of two competing policies. Id. at *31. They are the desire to prevent creditor dishonesty and the need to minimize interference with honest dispositions. Id. Furthermore, various nonexclusive factors are pertinent when assessing commercial reasonableness. Id. They include 1) whether the secured party endeavored to obtain the best price possible; 2) whether the collateral was sold in bulk or piecemeal; 3) whether it was sold via private or public sale; 4) whether it was available for inspection before the sale; 5) whether it was sold at a propitious time; 6) whether the expenses incurred during the sale were reasonable and necessary; 7) whether the sale was advertised; 8) whether multiple bids were received; 9) what state the collateral was in; and 10) where the sale was conducted. Id. See Regent Fin. Co., 355 S.W.3d at 601-02 (mentioning the same indicia). The ultimate purpose of the commercial reasonableness inquiry is to ensure the creditor realizes a satisfactory price. Id. at 602. The latter does not necessarily mean the highest price, though. Id. Nevertheless, evidence must establish commercial reasonableness, and evidence offered to prove that through a summary judgment setting must be more than conclusory. See Meyer Farms, Inc. v. Texaco Producing, Inc., No. 07-01-0344-CV, 2002 Tex.App. LEXIS 7239, at *10 (Tex. App.-Amarillo Oct. 2, 2002, pet. denied) (mem. op.) (acknowledging that conclusory statements are not competent summary judgment evidence).
Mintaka described the way it sold the 2017 truck. The description appeared in the affidavit of Matt Jacobs, a paralegal with Mintaka's servicing agent. The sum total of his comments on the subject were:
Plaintiff subsequently sold the Vehicle by public auction through Manheim Dallas. It is customary among those in the motor vehicle re-marketing industry to buy and sell vehicles through public auction services, and Manheim Dallas is one of the most widely-recognized auctioneer servicers in the Dallas-Fort Worth Metroplex, where the Vehicle was auctioned. Moreover, the Vehicle was advertised online beginning on May 4, 2020, and ending on May 6, 2020, when the Vehicle was sold. The Vehicle attracted two bidders with the highest bid reaching $24,800. Plaintiff declined the highest offer because it did not reach the floor price of $26,000. The bidder subsequently contacted Plaintiff and purchased the Vehicle for $26,000 on May 6, 2020. The bidding process was recorded and documented through the Bid History. Accordingly, the Vehicle was disposed of in the usual manner through Manheim Dallas, which is a widely known and recognized market, at a price arrived at after Plaintiff's
receipt of multiple bids in said widely-known and recognized market, and Plaintiff's disposition was otherwise in conformity with the reasonable commercial practices among those in the motor vehicle sales industry. A true and correct copy of the Bid History is attached hereto and incorporated by reference for all purposes at Exhibit 'A-6.'
Per binding authority, we view his averments through light most favorable to the non-summary judgment movant, i.e., Regent. Helena Chem. Co. v. Cox, 664 S.W.3d 66, 73 (Tex. 2023) (stating that we "examine the evidence in the light most favorable to the non-moving party, indulging reasonable inferences and resolving doubts against the party seeking summary judgment").
Our first observation concerns Mintaka's preset sales price of $26,000. As revealed by Jacobs, that was its "floor," and the vehicle sold to the first person who paid it. Yet, how or why it preset the sales price of a vehicle bought in 2019 for $87,000 at $26,000 was utterly unexplained. He said nothing of the preset price as reflecting the vehicle's condition, mileage, market value, wholesale value, or anything else.
Next, we see that the online effort to sell the vehicle lasted only two days. Whether that very short period was common or acceptable in the "re-marketing industry" went undeveloped. Instead, one can infer from Jacobs' comments that Mintaka simply decided to end the auction when the first person came along to pay its unsubstantiated preset price.
As for the averment about "Manheim Dallas" being "a widely-known and recognized market," that too is a statement bereft of factual support. As such, it is conclusory and no evidence about whether use of the entity was commercially reasonable. Trinity River Estates, L.P. v. DiFonzo, No. 2-08-393-CV, 2009 Tex. App. LEXIS 4037, at *11-12 (Tex. App.-Fort Worth May 28, 2009, no pet.) (mem. op.). (defining a conclusory statement as one without factual support).
That the auction attracted two bidders means little given its nominal duration. Nothing was said about the likelihood or unlikelihood of attracting more bidders willing to pay a higher price had the creditor not simply accepted the first bid at its preset sales price. And, to the extent that Jacobs refers to some "Bid History" attached as an exhibit, the trial court sustained Regent's objection to it. So, the "Bid History" is unavailable to confirm his now conclusory representation about the "receipt of multiple bids."
Jacobs also alluded to the sale comporting with "reasonable commercial practices among those in the motor vehicle sales industry." Yet, missing is a description of those commercial practices, save for his reference about it being "customary among those in the motor vehicle re-marketing industry to buy and sell vehicles through public auction services." Do those in the "re-marketing industry" simply set a preset sales price without explanation? Do they too conduct online auctions of very short duration? Do they use "Manheim Dallas," and if so, how many and how often? And, what are the online sales practices and procedures of that entity; do they comport with those used in the industry? Are their auctions open to the general public or visible only by a small pool of select individuals? Does it advertise the auction, and if so, how and to what extent? Did it or anyone else write a description of the vehicle to post on the auction site, and if so, what did it say? These too are matters left undeveloped by Jacobs. And, though we do not necessarily require them to be addressed to prove the commercial reasonableness of an online auction, evidence of same would certainly help the analysis.
Mintaka's summary judgment burden consisted of establishing, as a matter of law, the commercial reasonableness of the truck's disposition. See Wal-Mart Stores, Inc. v. Xerox State & Local Sols., Inc., 663 S.W.3d 569, 583 (Tex. 2023) (describing the movant's burden in a traditional summary judgment setting as demonstrating the absence of genuine issues of material fact and "'entitle[ment] to judgment as a matter of law'"). Whether collateral was disposed of in a commercially reasonable way is generally a question of fact. Gailani v. Riyad Bank, 144 S.W.3d 1, 3 (Tex. App.-El Paso 2003, pet. denied). Of the ten indicia mentioned in Suntrust and Regent, the mere fraction covered through Jacob's affidavit left open the factual question of commercial reasonableness. Without more than what Mintaka provided here, we cannot say it established, as a matter of law, that the sale for $26,000 of a truck bought a year earlier at $87,000 was commercially reasonable. See Gailani, 144 S.W.3d at 3 (holding that the creditor failed to prove, as a matter of law, that the sale was commercially reasonable because of the details of the sale). See also Jantzen v. Am. Nat'l Bank of Tex., N.A., 300 S.W.3d 412, 416-17 (Tex. App.-Dallas 2009, no pet.) (finding the bank failed to produce summary judgment evidence on the factors courts have traditionally considered in evaluating the commercial reasonableness of collateral disposition); Capulin v. Retailer's Credit Union, No. 14-96-01354-CV, 1999 Tex.App. LEXIS 1690, at *7-8 (Tex. App.-Houston [14th Dist.] Mar. 11, 1999, no pet.) (mem. op.) (finding information in affidavit failed to establish, as a matter of law, the sale of the vehicle was commercially reasonable). This is not to say that the $26,000 price tag per se was commercially unreasonable, but, at this time, the nominal information before us failed to establish otherwise as a matter of law.
Sustaining Regent's issue, we reverse the final summary judgment and remand the cause to the trial court.